A new garden office - the tax implications
Lockdowns have proved that you can work effectively from home, so you are thinking of investing in a garden office. What are the key things to consider and are there any tax implications?
Homeworking works
The rising cost of trains, congestion on the roads and the merits of a more flexible approach to work have caused you to think about an office in the garden before, but you’ve never been sure it could work. The lockdowns have forced you into remote working and proved it can. So now you want to invest in a more comfortable office space at home.
Garden office benefits
While renovating inside is one option, there are certain benefits (if you have the space) to a garden office. These include:
No planning. Whether you are buying a ready-made office or building one from scratch, it’s unlikely that you will require planning permission. Check with your local authority before you get the hammer out though.
Shut that door. Practically, having a space separated from the house also means you can separate your home and work life more easily. The benefits of this should not be underestimated.
How much?
You can spend anything from £3,000 for a mini office which will only just fit a desk and chair to £30,000 for an elaborate affair with space for an armchair and log burner. Buying a modular kit means that you know what the costs are up front, and prices will often include everything from the foundations to lighting and flooring and in some cases even the internal decoration.
Water and light. You’ll also need to think about how to heat and light the office (including insulation). Having running water also needs to be factored in. And think carefully about where to site the office, you’ll want as much natural light as possible.
Tip. With pre-fabricated offices you will cut costs by about 25% if you put it together yourself. Some firms offer to part-build it, which will save you about 10%.
What about tax?
First, you’ll need to check with your accountant on the best way to deal with this kind of investment, as well as the ongoing costs. Here are a few pointers:
none of the costs of a DIY construction or the purchase price of a ready-made office are deductible from your business profits. This includes design, delivery charges, initial decoration, etc.
the normal tax rules apply to the cost of furniture, fixings, etc. which you add to the structure. This means you can claim a deduction for capital allowances
the cost of heating and lighting the office is tax deductible, as is the supply of water if it’s separately metered from your home. Repairs, including redecoration costs, are also tax deductible
where the cost of furniture etc. is within the annual investment allowance, the whole amount qualifies for a tax deduction for the financial year in which it is incurred.
Tip. VAT rules regarding structures differ from those for income tax and corporation tax. It can be reclaimed on not just the running expenses, but also the cost of building your own or buying a ready-made office. As usual, you must ensure there is a VAT invoice addressed to the business to support any claim.